Oil prices briefly surged close to $120 US per barrel on Monday before falling back as the war involving Iran intensified, raising fears about disruptions to oil production and shipping in the Middle East.
The price of Brent crude, the global oil benchmark, climbed as high as $119.50 US per barrel early in the day before easing to about $106 US, still roughly 14 per cent higher. West Texas Intermediate, the main U.S. crude oil benchmark, also jumped above $119 US before slipping back to around $103 US.
Fighting in the region has begun affecting major energy infrastructure. Bahrain accused Iran of striking a desalination plant that supplies drinking water, while its national oil company declared force majeure after a refinery complex was set on fire during an attack. Meanwhile, Israeli strikes hit oil storage sites in Tehran overnight.
The conflict, now in its second week, is raising concerns because several countries involved are key to global oil production and transport. About 15 million barrels of oil per day — roughly 20 per cent of the world’s supply — normally pass through the Strait of Hormuz, a critical shipping route bordered by Iran.
The risk of missile and drone attacks has slowed tanker traffic through the strait. Some countries, including Iraq, Kuwait, and the United Arab Emirates, have reduced oil production because they cannot export as much crude.
Oil prices cooled slightly after reports that Group of Seven (G7) countries may consider releasing oil from strategic reserves to help stabilize markets. France’s president said using emergency reserves is one option being discussed if prices keep rising.
Higher oil prices are already pushing up fuel costs and raising concerns about inflation around the world. In the United States, the average price of gasoline rose sharply over the past week, while diesel and natural gas prices also increased.
Many Asian economies are particularly vulnerable because they rely heavily on oil imports from the Middle East. Across parts of Southeast Asia, the sudden price spike has led to long lines at gas stations as drivers rush to fill up.
